When to sell gold: recycling, liquidation and a complete exit algorithm

There is no shortage of articles telling you how to buy gold. Very few explain how to sell. Yet what actually decides your profit is rarely the entry price — it is the handful of deductions taken out of your pocket at the moment you exit.

No forecasts here, just arithmetic: using freshly captured live quotes, we lay out how much a gold buyback really returns, which liquidation channel is cheapest, and where a take-profit should sit. Every number can be recalculated on your own calculator.

1. Get one thing straight first: you are not selling "the gold price"

The "gold at 4,124" you see in the news is the interbank mid price. You can neither buy nor sell at it. Every channel adds or subtracts a layer on top of it:

• Trading venue (spot / CFD): you sell on the bid at 4,123.96 — a gap of just 0.33, effectively negligible
• ETF: you sell into the best bid, typically 0.02%–0.1% away from NAV, plus broker commission
• Jewellery shop / recycler: a flat 92%–98% of the international price, then assaying loss deducted on top
• Bank buyback: only bars the bank itself issued, 1%–3% discount, original packaging and certificate required

Put differently: on 21 October, the same 100-gram bar could return you a sum that differs by more than CNY 5,000 depending on where you sell. That is why "selling" deserves more research than "buying".

2. The four deductions taken off a sale

2.1 The recycling discount (the biggest one)

At today's conversion of 887.57 CNY/g, here is what a 100-gram bar actually pays out at different discount levels:

Conversion = 4,124.29 ÷ 31.1035 × 6.6937 = 887.57 CNY/g

2.2 Assaying and melting loss

The buyer has to verify purity, usually by torch test or aqua regia cleaning. A legitimate dealer loses 0.5%–2%; a less scrupulous one can claim 5% or more — and you have no way to verify it. At today's price, 18K gold (75% fine) works out to about 665.7 CNY/g and 22K (91.6%) about 813.0 CNY/g. Anyone quoting "fine-gold prices for 18K" has a problem somewhere.

An example: a 30-gram 18K necklace has a theoretical gold value of 30 × 665.7 ≈ CNY 19,971. If a dealer lures you in with a fine-gold quote of 887.57 and then settles at "not fine gold, 8% melting loss", you may walk out with barely CNY 15,000 — the gap is worth about 4 grams of gold.

Remember the order: agree the per-gram price for the stated purity first, then the melting loss, and only then the total. Reverse the order and you lose all your negotiating room.

2.3 Handling fees and fabrication deductions

Some dealers leave the unit price alone but charge "assay fee CNY 50 per item", "melting fee CNY 10 per gram" or "1%–3% without invoice". The labels differ; the effect is the same — money out of your pocket. When negotiating, ask exactly one question: "I have 100 grams. What do I walk away with?"

2.4 Tax and FX conversion

Converting to renminbi adds another layer: the USD quote × the exchange rate, minus the conversion spread (0.3%–0.5% at a bank, 0.2%–0.4% at a money changer). On larger amounts this step can be more visible than the recycling discount itself.

3. The real cost of three exit routes

The conclusion is blunt: if your gold is paper (ETF, CFD), the exit cost is close to zero; if it is physical, the exit cost starts at 2%–8%. So the real answer to "should I buy physical?" depends on how you plan to get out.

4. Five traps in a buyback quote

1. Baiting with a "best price": the ad says "we pay above the international price", then purity, melting loss and fees claw it back at the counter. No genuine buyback can sit above the international price.
2. Games with the scale: weigh it at home on a kitchen scale (1-gram precision) first, then weigh again in the shop. A difference above 0.5 grams is a red flag. On 100 grams, 0.5 grams ≈ CNY 440.
3. Opaque "gold washing": aqua regia dissolves the surface layer, and how much is lost is entirely the dealer's word. Insist on weigh → assay → re-weigh, and be present for all three steps.
4. A total price but no unit price: demand the breakdown "CNY per gram × grams − fees", itemised in writing. Otherwise you cannot compare offers.
5. An extra charge for no invoice: without proof of purchase you lose 1%–3%, and large transactions require identity registration (an AML requirement). That part is normal — but it is not a licence to shave the price at will.

5. Take-profit: replace "a feeling" with a rule

The hard part of selling is not the click, it is the decision. Here are three executable rules — pick one, write it down, and you will do far better than improvising.

Rule A: scale out at target prices

Sell a third at 25%, 32% and 40% above cost. Say you bought 100 grams at 780 CNY/g (today 887.57, unrealised gain CNY 10,757):

• First tier at 975 CNY/g → sell 33 grams
• Second tier at 1,030 CNY/g → sell 33 grams
• Third tier at 1,092 CNY/g → sell 34 grams

Rule B: trailing stop (ride the trend)

Set the distance from volatility, not from guesswork. Over the last 27 trading days gold has ranged between 4,073.93 and 4,402.73, with an average daily range of roughly USD 12.2; three times that is about USD 36. Placing the stop/take-profit around USD 36 below the high keeps you out of ordinary noise while still getting you out when the trend turns.

Rule C: rebalancing (best for long-term allocation)

Ignore price, watch the weight: if gold exceeds 15% of total assets, trim to 10%; if it falls below 5%, top up to 10%. The beauty of this rule is that it requires no view on the market at all.

6. Three objective signals to check before you sell

This is not forecasting, it is a checklist — every item is available in public data:

Only when all three turn together is it worth considering a reduction. One alone is usually just noise.

Timing matters too: the spread varies 3x within a day

Gold trades 24 hours, but liquidity does not. Beijing time (UTC+8):

Exiting the same 100-ounce position at a USD 0.2 spread instead of USD 0.8 is worth USD 60. Physical recyclers mostly settle at "the international price of the day", which looks session-independent — but they quote using whichever moment of the day suits them best. That is why you should negotiate between 9pm and 11pm, when the international market is most active and "it's quiet today" is not available as an excuse.

7. Tax: the table you must check before selling

Taking the US: the CNY 10,757 unrealised gain above would be taxed at 28%, about CNY 3,012; in Canada, with 50% inclusion and a 40% marginal rate, the effective burden is about CNY 2,151. The same sale nets very different amounts depending on where you live.

8. When you should not sell

• It is a hedge position: gold at 5%–10% of assets exists to cushion an equity selloff. Wiping it out because it rose 20% is the same as cancelling your insurance.
• You just need cash: sell your most liquid assets first (money market funds, short-duration bonds). Dumping physical gold first means volunteering to pay a 3%–8% discount.
• You want to "get out at break-even": your cost basis means nothing to the market, which has no idea what you paid. Decide on rules, not on your entry price.
• You want to "lock in the gain" but haven't counted tax: selling is a taxable event. Work out the after-tax proceeds before deciding how much to sell.

9. A one-page decision table

10. Frequently asked questions

Q. How far below the international price is a typical buyback?
A. Usually 2%–8%. Established jewellery shops tend to sit at 97%–98%, street buyers at 92%–95%, and lower still without an invoice or with doubtful purity. Anything under 92% is an aggressive discount; asking three more dealers typically recovers 30–50 CNY per gram.

Q. Is gold subject to tax when I sell?
A. It depends on the country and the form. In the US, physical and ETFs are collectibles at up to 28%; Canada includes 50%; Australia gives a 50% discount after 12 months; Singapore does not tax individual capital gains; Japan charges 20.315% beyond 5 years. Local law governs.

Q. Where should I set my take-profit?
A. Use a rule, not a feeling: three tranches at 25%–40% above cost; or halve the position on a break of the 20-day moving average or an 8% retreat from the high; or trim to 10% when the weight exceeds 15%. This month's 8.07% amplitude shows an 8% drawdown is entirely possible.

Q. Can I sell a bar without an invoice?
A. Yes, but you will be priced down. Banks only buy back their own product and require original packaging and certificates; jewellery shops accept any source but typically deduct 1%–3% without an invoice, and large amounts require ID registration to comply with AML rules.

Q. Gold is at 4,124 — should I sell or hold?
A. This article gives no buy or sell recommendation, only a framework: start from the role this gold plays. A hedge should not be adjusted for short-term moves; a speculative position in profit should be scaled out; if you need cash, sell paper gold before you dump physical.

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